Jim Loach swore he'd never follow his father, Ken, into film-making, yet his first movie – a searing drama about the scandal of children in care secretly shipped to Australia – is set to debut at the Rome film festival

When Jim Loach's first film, Oranges and Sunshine, makes its debut at the Rome film festival this week, it will mark the end of many journeys. For the subjects of Loach's film, some of the 100,000 or more children who were taken from orphanages in Britain and shipped as a secret cargo to Australia and other Commonwealth countries, it marks another stage of closure in a shameful and shocking passage in our recent history. For Margaret Humphreys, the Nottingham social worker who has made helping those children – now adults – discover their identities and families her mission and vocation, it is a stirring tribute to half a lifetime of compassionate forensic work, which culminated in an official apology from the governments of Britain and Australia in the past year. And for Jim Loach himself, who has been trying to get this film made for eight years now, it is a kind of personal catharsis.

Loach, an easy-going 41-year-old, has had one of the hardest of all film-making acts to follow in his father, Ken. "When I was younger," he tells me over lunch in north London, "I made a blood oath with my sister that we would have nothing at all to do with film; I wanted to be a journalist. But over the years I felt the need to tell stories in this particular way sort of got the better of me. I walked around it for a long time. It sounds naff, but I had to find a way of making peace with the idea of doing what my dad did. It is undeniably difficult. Only now it's finished can I begin to think it as not quite so big a deal."

I don't know whether there is a storyteller's gene, but though Jim Loach is very much his own man, elements of his father's gift for narrative emotional clarity shine through his film. Some of this, perhaps, has to do with the fact that Jim worked closely with the screenwriter Rona Munro, who also scripted Ken Loach's film Ladybird, Ladybird. But at least as much comes from the performances the director has drawn from a cast that is led by the wonderful Emily Watson, who plays Margaret Humphreys with a compelling mix of vulnerability and strength. Loach first read Humphreys's memoir of her extraordinary life, Empty Cradles, almost a decade ago. "I always knew it would be a brilliant story to tell," he says, "but also a difficult one. You could have focused on the role of the state, or of the church, or told it through the eyes of the children themselves."

In the end, Loach determined that the best way into the story was through the experience of Humphreys who, having stumbled accidentally on evidence that this covert deportation went on from the end of the war until 1970, was almost overwhelmed and destroyed by the effort to bring it into the open. Loach talked as much as he could to Humphreys, though to begin with, "as a normal, private person", she was "understandably wary" of the idea of her story coming to the screen. "None of us wanted to do something that was just mawkish," he says, "just a revisiting of all this pain that didn't do anything but offer sympathy, and of course we had to convince Margaret of that." When we meet Loach has showed Humphreys the finished film for the first time the previous week. "I was hugely nervous," he says, "but she was comfortable with it, which was fantastic."

One of the curious aspects of making this film at this time is that, in the years of its planning and creation, it has come to seem ever more urgent and pointed. The apology that Gordon Brown eventually gave to parliament over the British government's systematic failure of its duty of care to these thousands of vulnerable children arrived just as Loach was preparing to shoot the film in Australia. "Then of course," he says, "there were all these stories coming out about the Catholic church, and one of the things that you cannot help concluding, having worked on a story like this one, is that there is still so much more to come."

Oranges and Sunshine hints at and reveals a scale of abuse against the deported children – much of it under the authority of the church – that is hard to contemplate. Many had been housed in orphanages in Britain temporarily, often taken to avoid stigma from mothers to whom they had been born illegitimately. When some of these mothers came later to the children's homes to have their sons and daughters returned, they were told that they had been adopted and were now no longer traceable; in fact they had been sent halfway around the world. The children, some as young as four and five, and promised the "oranges and sunshine" of the film's title if they volunteered to go, travelled in many cases without papers, and were sometimes told, wrongly, that their parents were dead. If there was more than one child on a ship with the same name, the names would be arbitrarily changed, which made Margaret Humphreys's detective work all the more difficult. Brothers and sisters were generally separated on arrival.

The film focuses on the story of a group of boys who were taken in by the Christian Brothers, and forced to build, barefoot in the outback, a palatial school building, at which they were subject to horrific physical and sexual abuse. Bindoon, the name of the school, has become a byword in Australia for the secret migration. Loach's film takes you into the story of one of the men who survived that place, a composite of several of the many grown-up orphans he and Rona Munro interviewed for the film. It culminates in him taking Humphreys to visit the Christian Brothers who still lived in their surreal building.

Loach, of course, asked for permission to film at Bindoon itself, which is now an agricultural college, but the Catholic authority that still owns the building refused. He did go on a surreptitious visit, though; an experience he describes as "totally overwhelming. We hopped over the fence, to be honest; this place is absolutely remote and fantastically grand. Rona and I were taken around by a man who had been there as a boy, and was very clear about the bits he had helped to build with his bare hands and the appalling conditions in which they lived. It was like a prison camp." Loach has two young children himself. "The thing that just struck me was how utterly unsuitable this place was for children, how it was built entirely for the monster egos of adults."

The film dwells on the psychological difficulty for someone like Margaret Humphreys of taking on the burden of all this buried pain, of trying to manage the hopes of the thousands of people who wanted to discover their real identity. Loach, who spent a long time talking to those who still don't know the truth of their early lives, must have had an insight into how that felt?

"In a small way, yes," he says. "I found it much more draining and harrowing than I thought I would. You can't help but be immersed in the stories of the people you meet. And, of course, I was a very long way from home, back and forward to Australia a lot. There is a massive responsibility to the people whose story you are telling, and the demands of film-making are not necessarily the same as those responsibilities. On the one hand, you are running a shoot, which takes everything emotionally and physically, and then there is the need to convey the truth of a story that is still very present for a lot of people." They are planning a special screening for some of those individuals; it will undoubtedly be a profoundly emotional event.

One of the ways that Loach mitigates some of the implied horror in the film is in the character of Len, the boy who survived Bindoon. He is an Aussie male, almost in the Crocodile Dundee mould (played with great charm by David Wenham), and emphatically not a victim. That was very much the reality of a lot of the men that Loach spoke to. "If you offered them pity, they would tell you to fuck off. For us that was really appealing, the reverse of what you expect."

This very human casting against type would no doubt be something that Jim Loach's father would admire. Ken watched the film in the cutting room, and suggested one or two changes, which his son welcomed, though you guess slightly through gritted teeth. He smiles. "Really, we all need someone to come in and say leave this bit out, or that bit will work better if you do this. Dad is very precise about all that. But I mean there was also a bit of a feeling of having your homework marked."

Did he agree with his father's suggestions?

"A few of them we didn't do – he may not know that yet. But he does have a very good grip on how to tell a story in the most concise way. We cut about 10 minutes out, and, to be fair, it does run much better."

In the past, Jim Loach says, he has tended to dodge questions about his father at all costs, but the fact of now having finally done it for himself helps him to confront the relationship a bit more squarely. "Obviously he is my inspiration," he says. "But obviously, also, he casts quite a long shadow."

Jim Loach and his sister were brought up far away from the film-making world in Bath. He was, he says, as likely to talk to his dad about football as movies – still is – particularly Bath City, the non-league club of which Ken Loach became a shareholder after a fans' buyout. "Our Christmases were always the same," Jim says. "On Christmas Day afternoon, my sister and me would be out on the Bath City pitch with garden forks, trying to get it drained for the Boxing Day match." Though he obviously saw all of his father's films when he was old enough, Jim can only recall being on the set once as a child, when his sister (Emma, who now makes documentaries) knocked over a piece of scenery and they were "hoiked away". Their life was so "normal" that it was hard, he suggests, even to understand the idea that his dad was a director at all. "This will sound odd, but I remember hearing my dad on the radio when I was seven or eight and the interviewer was introducing him. And it was only at that moment that I realised the Ken Loach we sometimes heard on the radio was also our dad. Up until then, when I had heard him, I thought he was another person – he sounded different."

Jim Loach studied philosophy at university, and pursued an ambition to become a print journalist after that. He only started to direct after he worked on World in Action for Granada. "At that time," he says, "if you worked on World in Action they let you have a go at directing an episode of Coronation Street." He arrived at the Rovers Return, he says, with some rules in his pocket about film-making that his father had written down for him, literally, on the back of an envelope. "Obviously it all went out of the window in the first five minutes or so," he recalls, with a laugh. "Dad's rules didn't turn out to be that applicable to Corrie. I had someone improvise a speech and was called into the producer's office to be told in no uncertain terms that 'we don't do improvisation on Coronation Street…' So that was that."

There were compensations for this artistic compromise, however. The best one, he says, was that "for my gran it was the absolute pinnacle of my career. And there was nothing that my dad had done before or since that could top it…"

One of the reasons that Loach believes he pursued the current film was that, subconsciously, it was not in traditional Loach family territory. "It was no coincidence that I went to Australia to make it. I did feel a bit: anywhere but here."

Has he got that particular neurosis out of his system now, I wonder.

Well, he suggests, the next film he hopes to make, also written by Rona Munro, will be set on a Glasgow council estate, and tell the story of asylum seekers subject to dawn raids. So you would have to conclude that he has.

Oranges and Sunshine is showing at the Rome international film festival on Saturday and will be on general release in the UK early next year

• This article was amended on 28 October 2010 to correct the name of Margaret Humphreys's memoir to Empty Cradles.